I heard an interesting story in the final day of the Private Sector Conference organized by Kuwait Chamber of Commerce and Industry. Quoting British historian Alan Rush, historically the ruling family has always been suspicious of the merchants and viewed them as competitors for their power, asserted one speaker. This goes back to the days when the ruling family collected taxes and subsequently the merchants had a wider say over governance of the country.
This historical clash explains the diminished role of the private sector today. Even though oil wealth replaced taxes and hence the reliance on merchants, the suspicion continued. One bright spot in this historical clash was during the era of Sheikh Jabir Al-Ahmed as Minister of Finance. According to the tale there was a struggle within the ruling family at that point to appoint the crown prince. The Emir then Sheikh Abdulla Al Salim wanted to appoint his brother. While Sheikhs Fahad Al-Salim and Abdulla Al-Mubarak competed for that position they were unpopular within the ruling family. The ruling family and the British had Sheikh Jabir Al-Ahmed in mind.
Feeling the threat, Sheikh Jabir Al-Ahmed allied himself with the merchants and that was the golden era of the private sector. Unfortunately this did not last. As the struggle within the ruling family abated, the relationship with the merchants went back to its old suspicion. Unless this changes the private sector will continue to play a marginal role in the economy. No wonder the private sector commands only a third of GDP the lowest in the Gulf, and even compared to a socialist country such as China where it stands at two thirds.